California Bankruptcy Lawyer Blog

Advanced Marketing Services, a bestselling book distributor to warehouse stores, is encountering resistance from creditors to its Chapter 11 bankruptcy reorganization efforts. In a petition filed last week by AMS’s unsecured creditors, a judge is being asked to order the company to cease operations and “transition into liquidation mode.”

A hearing is scheduled today for a federal bankruptcy judge to hear AMS’s proposal for how it will develop a plan to sell, partially sell, or refinance the business. The California-based company says it has formed confidentiality agreements with potential buyers and investors. It wants a bankruptcy judge to grant it permission to sell Publishers Group West, one of its subsidiaries, to publishing and distribution company Perseus Books.

While AMS’s creditors support the sale of Publishers Group West, they believe that the debtor is insolvent and should stop spending money by shutting down its operations. Last week, a committee of AMS’s unsecured creditors filed objections to the company’s proposal, which they are convinced will fail. Penguin Books and Random House are members of the committee.

“Because AMS's business has crumbled, AMS is no longer a viable business entity, and it should quickly ratchet back the scope of the operations and expenses and transition into a liquidation mode,” said a committee member.

Continue reading "Creditors of Advanced Marketing Services Want Bankruptcy Judge To Order Company To Liquidate" »

In the Delta Airlines Chapter 11 bankruptcy case, an adhoc creditors committee for the carrier company is requesting a postponement of a February 7 bankruptcy hearing. The creditors say they want to examine a $9.87 billion offer from US Airways Group Inc. to purchase the bankrupt carrier company.

In a written statement submitted yesterday, the creditors said that the US Airways offer of cash and stock offers a "superior recovery for creditors compared to what they would receive under Delta's standalone Chapter 11 plan." The creditors group is made up of creditors holding approximately $2.4 billion in claims. Previously, the creditors had asked Delta to consider the U.S. Airways offer. Now, they want the official creditors committee to ask Delta to look at the offer.

According to Anne Granfield, a spokeswoman for the ad hoc committee, "As it stands, unless the official committee comes out and says something, creditors won't have a choice."

According to Granfield, US Airways says it will increase its bid amount for Delta as long as the creditors are able to postpone the hearing. US Airways, however, says it has not offered to increase its offer, which will expire on February 1. But the carrier does say that it will withdraw its bid if Delta’s reorganization hearing isn’t postponed by Thursday. US Airways had attempted a hostile takeover to purchase Delta last November.

Delta estimates that its value will be somewhere between $9.4 billion and $12 billion if it exits from Chapter 11 bankruptcy by the middle of the year as a standalone company. Once its disclosure statement, which it submitted in December, is approved, the carrier company can begin soliciting votes to get its reorganization plan approved.

Continue reading "Delta Air Lines Creditors Request Postponement of Bankruptcy Hearing" »

The California city of Los Angeles has filed an objection to Delta Air Lines Inc.’s Chapter 11 bankruptcy reorganization plan, claiming that the plan cannot be approved because of the undue authority it gives Delta to reject certain leases.

The city of Los Angeles owns Ontario International Airport and Los Angeles International Airport, both airports in Southern California where Delta maintains its leases and runs its operations. The city claims that Delta’s disclosure statement does not describe the possible effect that ending its Terminal 5 lease at LAX would have on the airline company’s financial performance and operations. Without this information, the city of LA and other creditors cannot accurately evaluate the workability of Delta’s reorganization plan.

LA also says that Delta’s reorganization plan improperly gives the airline company broad discretion to defer its decisions when it comes to rejecting or assuming certain unexpired leases beyond the effective plan date.

The airline company, which filed for Chapter 11 bankruptcy in 2005, estimates that it will be worth $9.4 billion to $12 billion if it emerges from bankruptcy protection as planned and as a standalone company by mid-2007.

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Pacific Lumber Co. announced last week that it had filed for Chapter 11 bankruptcy protection. The lumber company said a major reason that it needed to file for bankruptcy was because it had entered into the “Headwaters agreement,” which protected some of the world’s largest and oldest redwood trees from being chopped up at lumber mills.

Pacific Lumber is one of the largest timber companies in California. It filed for bankruptcy protection at a Texas federal court in Corpus Christi, Texas. Based in Scotia, California, the lumber company said it would not be able to make its $27 million interest payment that was due to bond holders last Saturday. This missed payment, according to Pacific Lumber, would cause the company to default on $714 worth of loans and lose the 200,000 acres of timberlands in Humboldt County that it had used for collateral.

Pacific Lumber, the State of California, and the U.S. government had signed an agreement giving the timber company 7700 acres of public timberland and $300 million in exchange for 5,600 acres of company land, where some of the tallest and oldest redwood trees in the world continue to grow. The deal also included a “habitat conservation plan” which regulated how many trees the company cut down.

In December 2006, Pacific Lumber filed a lawsuit against California claiming that certain government regulations ran afoul of the agreement. The timber company said the agreement had increased its logging expenses and the conservation plan made it so hard to cut down trees that the company’s future had been put at risk.

Continue reading "Pacific Lumber Company Files For Bankruptcy Protection" »

Calpine Corp. says that it is looking for new equity investors to help finance its exit from Chapter 11 Bankruptcy. The San Jose-based energy company also says that it has given a business plan—which could form the basis of its proposed reorganization—to creditors.

Calpine has been under bankruptcy protection since December 2005. The company has until June 20 to submit its reorganization plan that will show how it plans to exit Chapter 11 and pay back creditors.

In Court papers, the energy company stated that its net loss between December 2005 and November 2006 was $800 million greater than for that same period of time the year previous. The company attributes the loss to spending $1 billion in reorganization items. It’s core operating results, however, improved from the past year.

Calpine is the number one operator of natural-gas-fired power plants in the United States. It powers 27 million homes and supplies 3.5% of all electricity used in the US. The company has sold nearly 1/5 of its 92 plants since filing for bankruptcy protection.

Continue reading "San Jose-Based Calpine Corp. Seeks Investors To Finance Chapter 11 Bankruptcy Exit" »

NWA has filed its Chapter 11 bankruptcy reorganization plan. The airline company says that it plans to emerge from bankruptcy protection during the second quarter of 2007 as an independent company. NWA also says that it plans to eliminate unsecured debt by paying its unsecured creditors using common stock in the reorganized company. Preferred and common shareholders, however, will not receive anything.

A US Bankruptcy Court gave NWA an extension until February 15 to file its disclosure statement which will detail its reorganization plan for the public.

On Friday, NWA said that the plan included new, cost-saving lease agreements with airports and other facilities, as well as purchase agreements with engine and aircraft manufacturers.

Since filing for bankruptcy protection in 2005, NWA says that they succeeded in restructuring its fleet, removing $2.4 billion in yearly costs, significantly strengthening its balance sheet, and entering into new aircraft purchase agreements. New labor accords are also expected to save the airline carrier $1.4 billion each year.

Continue reading "Northwest Airlines Submits Bankruptcy Reorganization Plan" »

A bankruptcy judge in the U.S. District Court in Sacramento, California, is ordering Your Home Resort, an outdoor furnishing store, to convert to Chapter 7 bankruptcy and sell its assets to pay its creditors. The company was responsible for its customers' loss of thousands of dollars last year when it abruptly shut down its showrooms in Rancho Cordova and Rocklin.

Your Home Resort owes creditors approximately $3.5 million ($2.3 million of this is owed to unsecured creditors—customers that either paid deposits for outdoor furniture or paid for them in full but never received their orders.) Unsecured creditors, however, are generally paid after secured creditors, such as credit card companies and banks, in bankruptcy proceedings. Your Home Resort owes money to about 12 secured creditors.

An auction date has yet to be set. The outdoor furnishing store had sold barbecue islands, gazebos, hot tubs, and other outdoor furniture to customers.

The company had originally filed for Chapter 11 bankruptcy last August in an attempt to stay in business while reorganizing its operation.

Continue reading "Bankruptcy Court Says Furnishing Company Your Home Resort Must Liquidate Its Assets" »

A California woman has pleaded guilty to bankruptcy fraud after filing 13 bankruptcies from July 1999 to January 2006. Martha Montoya, a Sacramento resident, sought bankruptcy protection so that she could delay the payments of past due rents and continue living in rental homes for free.

Prosecutors say that she took advantage of the Bankruptcy Code’s automatic stay provisions after her landlords acquired judgments against her for rents owed. The landlords had also won the right to evict her family. Because she was under bankruptcy protection, however, the landlords could not collect the past due rents, evict her, or execute the judgments.

When an individual or a company files for bankruptcy, an automatic stay stops actions against you filed by many creditors, including Nolo.com):

· Utility disconnections. If you're behind on a utility bill and the company is threatening to disconnect your water, electric, gas, or telephone service, the automatic stay will prevent the disconnection for at least 20 days. (Also, bankruptcy will probably discharge the past due debts for utility service.) Although the amount of a utility bill itself rarely justifies a bankruptcy filing, preventing electrical service cutoff in January in New England might be justification enough.

Continue reading "Sacramento Woman Who Filed 13 Bankruptcies Pleads Guilty To Fraud" »

Richard Heltzel, chief executive officer of the U.S. Bankruptcy Court for the Eastern District of California, said he thinks that bankruptcy filings will increase again. The number of bankruptcies filed in the last fiscal year had dropped after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.

Following the enactment of this law in October 2005, courts in Modesto, Sacramento, and Fresno only took in 8163 cases over the next year—a 79% drop from the year before.

Hetzel believes bankruptcy filings will increase because of a stalled housing market and rising interest rates.

In the Eastern District of California—due to the new bankruptcy law—people who wish to file for bankruptcy must pass a means test in order to file under Chapter 7. If they exceed the median income for this district—$43,107 for a single person or $57,237 for a married couple—they are encouraged to file for Chapter 13 bankruptcy. While Chapter 7 erases debt, Chapter 13 requires that filers repay their debts over a period of time.

Continue reading "California Court Official Predicts More Bankruptcy Filings In 2007" »

A federal bankruptcy judge has approved Adelphia Communication Corp.’s plan to pay its creditors and conclude one of the largest bankruptcy cases in U.S. history. Adelphia, formerly the fifth largest cable television company in the United States, had filed for bankruptcy protection from creditors in 2002.

Last July, Adelphia sold substantially all of its cable operations to Time Warner Inc. and Comcast Corp. for $17.6 billion in cash and shares in Time Warner’s cable unit. From this amount, $15 million of this will be used to pay creditors. After paying its debts, Adelphia will terminate its business. In July 2004, Timothy Rigas (the finance chief of Adelphia at the time) and his father John were convicted of securities fraud and conspiracy.

CBSnews.com offers the following timeline of key events that led to Adelphia to file for bankruptcy:

1952

John Rigas, operating a small theater in Coudersport, Pa., buys a cable franchise on a friend's advice. At the time only 60 small cable systems exist in the United States. Rigas and his brother, Gus, name their company Adelphia, Greek for "brothers."

1983

John Rigas buys out Gus Rigas' interest. Later, his sons — Michael, Timothy and James — become executive vice presidents, directors and principal stockholders.

1994

John Rigas becomes majority owner of the Buffalo Sabres hockey team with a $15 million investment.

Continue reading "Bankruptcy Exit Plan By Adelphia Is Approved By Federal Bankruptcy Judge " »

Subprime mortgage lender Ownit Mortgage Solutions Inc. has filed for Chapter 11 bankruptcy protection at the U.S. Bankruptcy Court of San Fernando Valley in California.

The company, which makes loans to borrowers with poor credit and limited income, lists it debts as more than $100 million and assets between $1 million and $100 million. According to the LA Times, the bankruptcy filing is in response to lawsuits filed by two creditors.

Ownit Mortgage says that it owes its largest unsecured creditor, Merrill Lynch LP Holdings Inc., approximately $93 million. Merrill Lynch is also an owner of a 20% stake in Ownit Mortgage. Credit Suisse First Boston, owed $12.7 million, and Terwin Advisors LLC, owed $19 million, are also unsecured creditors of Ownit Mortgage.

The Automatic Stay

When filing for Chapter 11 bankruptcy, the debtor receives an automatic stay, which gives a debtor a period of time where all judgments, foreclosures, collection activities, and repossessions of property are suspended. Creditors cannot pursue any debt or claim from before the bankruptcy petition was filed.

Continue reading "California-Based Ownit Mortgage Solutions Inc. Files For Chapter 11 Bankruptcy" »